New Delhi/Bengaluru: Tata Semiconductor Manufacturing Pvt Ltd has raised ₹6,835 crore (about $735 million) from five foreign banks to fund its ₹91,000 crore semiconductor fabrication (fab) facility in Gujarat. The lenders have put conditions on ownership, branding and equity that reflect their reliance on the Tata Group’s credit profile and the tight financing terms shaping India’s chip manufacturing push, according to company filings and executives aware of the matter.
The lenders have stipulated that the Tatas retain a 51% stake in TSML, the wholly owned subsidiary of the privately held Tata Electronics, and continue using the ‘Tata’ brand, according to documents filed with the ministry of corporate affairs. The loan is to be repaid by 2031.
They also mandate the company to maintain at least ₹30 crore in equity for every ₹70 crore of borrowing.
Zero-valued land
Significantly, the Gujarat government’s 163.5-acre land leased to on a long-term basis has been valued at zero, according to the corporate affairs ministry filings reviewed by Mint. This appears to be because the land, about 120-km southwest of the state capital Gandhinagar, is an undeveloped area designated for industrial development. However, Tatas have pledged this land to the five banks to raise funds for their fab unit in a deal signed on 5 February, 2026.
TSML raised ₹1,743 crore from HSBC, ₹1,147 crore from MUFG, ₹1,102 crore from First Abu Dhabi Bank, ₹1,697 crore from DBS, and the remaining ₹1,146 crore from ANZ. These foreign banks used their branches in Gandhinagar’s GIFT City, allowing Tatas to avail cheaper interest rates.
Some of these loan terms have been dubbed “unconventional” by two executives privy to the developments, who suggested that the banks agreed to lend to the Tata Group company because of the conglomerate’s brand name.
“The banks’ credit decision is based on Tata’s global creditworthiness, and not the land valuations,” said one of the two executives at Tata Group, cited above. “The banks want the continued association of the Tata Group, hence leading to some of the clauses on the Tata brand name, and for the Group to retain majority control. The land mortgage is just the legal requirement that gives banks the right to step in.”
Most lenders will look to cash in on the semiconductor industry, given its potential, said Harshit Kapadia, vice-president of brokerage Elara Capital. “Offering debt to established electronics makers is generally a safer bet than relying on foreign firms, given the current geopolitical situation and rapidly changing policies,” Kapadia said. “But banks would want to hold any new project to careful scrutiny, as technically complex projects such as a fab can face long-term delays for many reasons.”
The delays Kapadia alluded to could be supply shortages of specialized gases and instruments, many of which could be disrupted by conflicting global trade, tariff, and supply chain disruptions.
A representative for Electronics, in response to Mint’s queries, said the company “does not have an update” to share.
Emails sent to each of the five banks involved in this deal did not immediately elicit a response.
Tata Electronics has put about ₹690 crore in TSML since it was set up in November 2023. The 5 February loan agreement with the foreign banks implied Tata Group would need to infuse more capital into the company to comply with its creditors’ requirement to maintain 30% equity, against its current borrowing of ₹6,835 crore.
The holding company, Tata Sons, has invested over $1 billion in its iPhone assembly business, Tata Electronics, since starting it in 2020.
Besides setting up the ₹91,000 crore chip manufacturing facility in , TSML is also setting up an outsourced semiconductor assembly and testing (Osat) facility in Jagiroad, Assam, at net investment of ₹27,000 crore, taking the total to ₹1,18,000 crore.
However, the Tatas are required to invest only ₹35,400 crore of this total sum, as the central government will provide 50% of the Dholera and Jagiroad projects’ total cost, with the Gujarat and Assam governments chipping in another 20%. This was formalized under India Semiconductor Mission, notified by the ministry of electronics and information technology (Meity) in December 2021. Tata’s two projects were approved in February 2024.
Tatas, in partnership with Taiwanese semiconductor manufacturer Powerchip, expects to start trial production by the first half of next year, with a capacity of 50,000 microchips per month. However, potential global disruptions, including supply of specialized gases and rare-earth metals, could pose a challenge to this deadline, Mint had reported, citing executives at TSML on 11 September.
The Dholera unit will manufacture chips of ‘mature’ standards, which, though not as cutting-edge as what the world’s top fabs such as Taiwan’s TSMC or Korea’s Samsung make, still find large-scale mainstream uses. These range from 28 nanometres (nm) to 110nm, and will find use in power management circuits, displays and microcontrollers (MCUs), according to analysts at Jefferies.
“The Tata chip fab’s construction has progressed at a steady pace, and some incidental delays are usual in such large projects. But, much of a chip fab’s success will depend on the first trial production phase of chips, which will happen only once the fab’s ‘clean room’ is equipped. If there are any issues on semiconductor purity or multiple other technical factors, the commercial functioning of the fab can be hampered,” said Ashok Chandak, president of industry body, India Electronics and Semiconductor Association.
According to Tata Sons’ annual report for FY25, Tata Electronics reported revenue of ₹66,601 crore, behind Air India’s ₹78,636 crore, and more than twice Tata Digital’s ₹32,188 crore. Its electronics business posted a ₹70 crore net loss, much less than the ₹10,859 crore loss from aviation, and the ₹4,610 crore loss from e-commerce.